Mexican Government's New Tequila-Export Regulations Create Conflicts with U.S. Liquor Distributors

SourceMex Economic News & Analysis on Mexico, October 1, 2003 | Go to article overview
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Mexican Government's New Tequila-Export Regulations Create Conflicts with U.S. Liquor Distributors

The Mexican government has proposed a new set of regulations that severely restrict the origin of tequila and the manner in which it is exported. The proposal revises the Norma Oficial Mexicana (NOM) del Tequila, which was implemented in 1997 to create special protections for the Mexican tequila industry.

Under the proposed revisions, which will be published in October and could go into effect at the start of 2004, Mexican tequila producers would no longer be allowed to sell tequila to overseas buyers in vats or bulk containers. Instead, all tequila exports will have to be bottled at 180 approved locations in five states. The majority of these sites are in Jalisco state, Mexico's largest tequila-producing state. The other sites are located in Michoacan, Guanajuato, Nayarit, and Tamaulipas states.

The Consejo Regulador del Tequila (CRT) said the new regulations are intended to help the government maintain a stricter control over the quality of tequila, which is protected by intellectual-property laws through various trade agreements (see SourceMex, 1997-02-12 and 1997-10-29).

"This decision will discourage fraudulent practices by those who did not respect the tequila norms," said CRT president Ramon Gonzalez Figueroa.

US council threatens to bring case to NAFTA

The proposed change, however, has angered some US liquor distributors who had traditionally relied on bulk shipments of tequila. In the first half of 2003, 73% of Mexico's tequila exports were shipped in bulk containers, with the remaining 27% in bottles, the CRT said. US industry sources said this is a slight drop from 2002, when 83% of tequila exports were shipped in bulk.

The new restrictions have prompted US bottlers to consider filing a complaint through the North American Free Trade Agreement (NAFTA). The Distilled Spirits Council of the United States--the national trade association of liquor producers, marketers and importers--considers the new regulations a nontariff barrier. The council estimates that US tequila importers could lose as much as US$500 million a year, since plants in California, Missouri, Arkansas, and Kentucky would no longer be able to bottle tequila.

"This proposal could have a grave effect on consumers worldwide through higher prices, fewer choices, and the significant potential for serious product shortages," said council president Peter Cressy.

The Mexican government is not concerned about the threats to bring the case before NAFTA, especially since tequila has received special international protections. "It's the right of Mexico to implement the standards of quality of the product," Hector Marquez, economic attache for the Mexican Embassy in Washington, said in an interview with The Washington Post. "We have to keep tequila as distinctive as possible."

US President George W. Bush's administration is studying the matter further before deciding whether to take any action. Allen Johnson, chief agriculture negotiator for the US Trade Representative's office (USTR), told a Senate hearing that the US government was still reviewing Mexico's proposed regulations and was working with US distillers to find a solution to the problem.

Most Mexican tequila bottlers welcome new regulation

As expected, the new tequila regulations were well received by the majority of the larger tequila bottlers. In an interview with the Mexico City daily newspaper Milenio Diario, tequila-industry executives Angel Gonzalez Aldana of Corporacion Asan and Jorge Torres Carlos of Destiladora San Nicolas said the new regulations were an important step to ensure the quality of Mexican tequila. Corporacion Asan is the bottler for the Honorable, Con Orgullo and Sublime brands, while Destiladora San Nicolas produces Espolon and several other popular brands.

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Mexican Government's New Tequila-Export Regulations Create Conflicts with U.S. Liquor Distributors


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